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1 An American National Standard for Human Resource Management Performance Management american national standard ANSI/SHRM xxx.2012

2 American National Standard for Human Resource Management Performance Management Standard Approved NOVEMBER 30, 2012 American National Standards Institute, Inc.

3 NOTICE and DISCLAIMER The information in this publication was considered technically sound by the consensus of those who engaged in the development and approval of the document at the time of its creation. Consensus does not necessarily signify unanimous agreement among the participants in the development of this document. This American National Standard was developed through a voluntary consensus standards development process. This process brings together volunteers and/or seeks out the views of persons who have an interest and knowledge in the topic covered by this publication. Although SHRM administers the process and establishes rules to promote fairness in the development of consensus, it does not write the document, and it does not independently test, evaluate or verify the accuracy or completeness of any information contained in its standards publications. SHRM is a nonprofit individual-membership association with no regulatory or licensing enforcement power over its members or anyone else. SHRM has no authority to monitor or enforce compliance with the contents of this document, nor does it undertake to monitor or enforce compliance with the same. SHRM does not list, certify, test, inspect, monitor or approve any policies, practices or organizations for compliance with its standards. It merely publishes standards to be used as voluntary guidelines that third parties may or may not choose to adopt, modify or reject. Any certification or other statement of compliance with any information in this document shall not be attributable to SHRM and is solely the responsibility of the certifier or maker of the statement. SHRM does not accept or undertake a duty of care to the general public regarding this HR standard. SHRM disclaims any and all liability for any personal injury, property, financial damage or other damages of any nature whatsoever, whether special, direct, indirect, consequential or compensatory, directly or indirectly resulting from the publication, use of, application or reliance on this document. SHRM disclaims and makes no guaranty or warranty, expressed or implied, as to the accuracy or completeness of any information published herein, and disclaims and makes no warranty that the information in this document will fulfill any person s or entity s particular purposes or needs. SHRM does not undertake to guarantee the performance of any organization or its employees, products or services by virtue of this standard. In publishing and making this document available, SHRM is not undertaking to render legal, professional or other services for or on behalf of any person or entity. Anyone using this document should rely on his or her own independent judgment or, as appropriate, seek the advice of a competent professional in determining the exercise of reasonable care in any given circumstances. Information and other standards on the topic covered by this publication may be available from other sources, which the user may wish to consult for additional views or information not covered by this publication Society for Human Resource Management (SHRM). No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of the copyright owner. ISBN About SHRM The Society for Human Resource Management (SHRM) is the world s largest association devoted to human resource management. Representing more than 250,000 members in over 140 countries, the Society serves the needs of HR professionals and advances the interests of the HR profession. Founded in 1948, SHRM has more than 575 affiliated chapters within the United States and subsidiary offices in China and India. Suggestions for improvement of this document are welcome. They should be sent to the Society for Human Resource Management, Secretariat, HR Standards, 1800 Duke Street, Alexandria, VA,

4 Foreword The information contained in this Foreword is not part of this American National Standard (ANS) and has not been processed in accordance with ANSI s requirements for an ANS. As such, this Foreword may contain material that has not been subjected to public review or a consensus process. In addition, it does not contain requirements necessary for conformance to the Standard. ANSI guidelines specify two categories of requirements: mandatory and recommended. The mandatory requirements are designated by the word shall and recommended requirements by the word should. Where both a mandatory requirement and a recommendation are specified for the same criterion, the recommendation represents a goal currently identifiable as having distinct compatibility or performance advantages. ABSTRACT Every organization, regardless of its mission, strives to reach objectives through its workforce. Successful results are achievable if all members of the organization team know and share strategic goals and know and achieve their individual goals. Therefore, effectively managing employee performance is critical to organizational success. Over the years, consensus has developed about the minimum elements of an effective performance management system, particularly in three areas goal setting, performance review and performance improvement plans. This Standard defines these minimum effective elements without restricting firms from customizing to match their unique business climates. The Standard is structured at a high level. Specific consideration and responses are also addressed for consideration by individual organizations based on specific performance management environments and requirements. ANSI/SHRM i

5 Taskforce Members At the time it approved this document, the Performance Management Taskforce, which is responsible for this Standard, had the following members: Taskforce Leader: Susan Harmansky, Southern Graphic Systems, Inc. (2009- present) Associate Taskforce Leader: Dr. Cheryl Wyrick, California State Polytechnic University Pomona (2011-present) Active Members Ronald Adler, Laurdan Associates, Inc. Paul Belliveau, Infosys Limited Crist Berry, RCB HR Consulting Lora Boltniew, Deloitte Services LP Brad Boyson, SHRM Winoka Clements, Erickson Living, Wind Crest Community Dr. Cheryl Crozier Garcia, Hawaii Pacific University Gabriella Davis, IAPMO Donna Dorsey, Navistar, Inc. Dan Duggan, CPI Corp Susan Harmansky, Southern Graphic Systems, Inc. Observers Dawn Adams, HResults Chana Anderson, Jewish Senior Living Group Kim Bartkus, HR-XML Consortium Sussane Bond, Halogen Software Stephanie Brown, USDA Farm Service Agency Gregory Komarow, Cleveland Clinic Abu Dhabi Aditeei Lagu, The State of Vermont Marie LaMarche, Harrison Medical Center Pauline Lewis, Superior Court of California, County of Los Angeles Beth Longton, H.R. Outcomes, L.L.C. Edward Manns, SAE International Dr. Randy McCamey, Tarleton State University Paul Mizzi, AUMA Wendy Nepute, KentuckyOne Health Patricia Rogers, Coventry University Stefanie Denoncour, Almacgroup Gregory Hamluk, American Red Cross National Headquarters Iona Harding, Harding Resources Nikki Hughes, Enhanced Resources LLC Deborah Keary, SHRM Dr. Lori Roth, Compass Workforce Solutions Rick Schemm, Royal Credit Union Dennis Schroeder, Dennis Schroeder and Associates Dr. Gary Stroud, Franklin University Darien Smith, Trojan Battery Company Mary Spilman, Spilman & Associates, Inc. Dana Valley, Cardinal Health Leslie Weatherly, American Public University Pete Wood, WorldatWork Dr. Cheryl Wyrick, California State Polytechnic University Pomona Bruce Olin, Volvo Parts North America Vanessa Prater, The Newman Group, a Korn/Ferry company Tracy Richardson, Invensys Rail North America SHRM HR STANDARDS SECRETARIAT STAFF Lee Webster Amanda Benedict Eddice Douglas Director, HR Standards Manager, HR Standards Coordinator, HR Standards ii AMERICAN NATIONAL STANDARD

6 Contents Foreword... i Abstract... i Taskforce Members... ii 1.0 Scope, Purpose, Application, Interpretation Normative References Executive Summary Glossary Overview of Performance Management Goal Setting Standard Performance Review Standard Performance Improvement Plan Standard Connections to Other Performance Management Processes Supporting Documentation ANSI/SHRM

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8 1.0 Scope, Purpose, Application, Interpretation 1.1 Scope The scope of this Standard is limited to three elements of a performance management system: goal setting, performance review and individual performance improvement plans. Although a performance management system encompasses many other elements and interfaces, such as compensation planning, individual or team development plans, and job descriptions, these elements are not addressed in this document. 1.2 Purpose The purpose of this Standard is to put goal setting, performance reviews and performance improvement plans in the context of a performance management system and to identify the minimum elements required for them to be effective. Recognizing that all organizations have unique cultures and objectives, the Performance Management Taskforce intends for these standards to be applicable to the broadest possible range of organizations large and small, public and private, union and non-union, and for-profit, not-for-profit and nonprofit. 1.3 Application Organizations hoping to build, redesign, update or evaluate a performance management process can use this Standard as a guide. 1.4 Interpretation To achieve consistent application of this Standard, suggestions involving changes in the requirements or disputes over its interpretation shall be referred to the following organization: HR Standards Secretariat Society for Human Resource Management (SHRM) 1800 Duke Street Alexandria, VA Fax: Website: If it is determined that your inquiry requires an interpretation of the Standard, the inquiry must be submitted in writing, and SHRM will forward the inquiry to the appropriate Standard s taskforce leader for a taskforce response. ANSI/SHRM

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10 2.0 Normative References The following Standard contains provisions which, through reference in this text, constitute provisions of this American National Standard. At the time of publication, the editions indicated were valid. All standards are subject to revision, and parties to agreements based on this American National Standard are encouraged to investigate the possibility of applying the most recent editions of the standards indicated below. 2.1 Normative The following documents contain provisions, which, through reference in this text, constitute provisions of this Standard. At the time of publication, the editions indicated are valid. All standards are subject to revision, and parties applying this standard are encouraged to investigate the possibility of applying the most recent editions of the documents listed below. None. 2.2 Informative The following publications may provide valuable information to the reader but are not required when complying with this Standard. Pulakos, E. (2004). Effective practice guidelines: Performance management. Alexandria, VA: SHRM Foundation. Retrieved from about/foundation/products/pages/performancemanagement.aspx. Pulakos, E. et al. (2012). Building a high-performance culture: A fresh look at performance management. Alexandria, VA: SHRM Foundation. Retrieved from Mgmt%20EPG-FINAL%20for%20web.pdf. Mathis, R., & Jackson, J. (2010). Human Resource Management. 13th ed. New York: South-Western Cengage Learning. ANSI/SHRM

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12 3.0 Executive Summary Every organization, regardless of its mission, strives to reach objectives through its workforce. Successful results are achievable if all members of the organization team know and share strategic goals and know and achieve their individual goals. Therefore, effectively managing employee performance is critical to organizational success. Despite the impact performance management can have on individual and business success, effective performance management is difficult to do consistently and well. Over the years, consensus has developed about the minimum elements of an effective performance management system, particularly in three areas: Goal setting: the process of establishing objectives to be achieved over a period of time. Performance review: the process of assessing progress toward goals. Performance improvement plans: the process of addressing a specific individual performance issue. Performance management is the foundation for organizational effectiveness for employers worldwide. To innovate, develop, sell and maintain goods and services that deliver value to customers, clients or stakeholders, organizations must employ techniques that encourage and motivate employees to perform to their full potential in a manner that adds value to the organization. Effective performance management processes serve a critical function in communicating expectations to employees, providing ongoing feedback and coaching, and in some cases addressing performance issues. In many organizations, the human resource department has the role of oversight and control of the performance management system, but the objective of successful performance management is shared by all members of management. Senior management support for a performance focus is key, as is the creation and maintenance of a corporate culture that supports individual and team accountability for solid performance. The Standard presented here addresses three elements of an effective performance management system and is intended for the broadest possible application to effective processes for small or large organizations of all varieties and structures. Although the Standard has been written using individual performance as an example, the principles of effective performance management in this Standard may also be applied to team performance management. Whereas this Standard offers guidelines for structure and timing, an effective performance management system is dynamic and flexible enough to accommodate differences or changes in business priorities and organization cultures. ANSI/SHRM

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14 4.0 Glossary 4.1 Definitions Term Alignment Coaching Collective Bargaining Agreement (CBA) Competencies Goal Area Goals Individual Development Plans (IDPs) Key Performance Indicators (KPIs) Manager Likert Scale Performance Improvement Plan (PIP) SMART Union Workforce Definition Refers to synchronization between top management and the workforce. Performance goals for individuals and teams should be aligned with the organization s goals. Ideally, each level of goals should cascade from the goal level above. For the purposes of this Standard, this term is used interchangeably with counseling. In the United States, refers to the written agreement between a union and management. A collective bargaining agreement is a legal contract between the employer and a group of employees who are represented by a union. It establishes employment terms and conditions for a specified period of time. Depending on the collective bargaining agreement, the possibility exists for preferential treatment for union members in the event of a layoff or other similar situation. Performance criteria based on behaviors. Some organizations develop a set of competencies expected of their employees at each level and measure performance against these competencies. Competencies are knowledge, skills, abilities and other characteristics (KSAO) needed for effective performance in the job in question. A grouping of related goals. Objectives set to drive performance toward achievement. They are expectations for outcomes agreed upon by employer and employee. These may be project goals, duties to be fulfilled or measurements of behaviors. Career planning tools designed to strengthen employee skills and develop an employee for future opportunities. Individual development plans fall outside the scope of the Performance Improvement Plan Standard, but are defined here to distinguish their purpose and use. An individual development plan (also known as a career development plan) may be used in conjunction with the performance appraisal process as a final documented step to assist employees in goal setting and individual development for future career planning purposes. It may or may not indicate a performance deficiency, but usually forms the basis for a strategic partnership between the manager and the employee to achieve goals in a defined upcoming performance period for the employee s personal career development. Quantifiable performance measures based on predetermined success factors of a business, department or project. KPIs may vary by project, department or business, be weighted differently by each project, department or business, and be either financial, nonfinancial or both. Used generally in this document to refer to the individual with oversight of performance for workers. In some instances, this position may be called supervisor or team leader. In matrix organizations, this position may be called a coach. An evaluation scale indicating an escalating level of agreement or performance; for example, typically a five- or seven-point scale from worst to best. A documented process specifically developed to address an individual s unsatisfactory performance issues. The PIP may be used by managers as a means to identify specific goals for an employee s performance improvement, timelines for goal attainment and measurable outcomes that define success against those goals. Terminology can be varied regarding performance improvement plans, and some employers may use the phrase synonymously with individual development plans (defined above). However, the need for a PIP results from specific situations that differ from the career planning design and the use of individual development plans. PIPs are used as part of a well-designed performance management program but are not typically a regular component of the performance appraisal process as it applies to all job incumbents. Instead, the PIP may emerge as an outcome or recommendation of a performance review or may be used on an as-needed basis outside the employer s regular performance review cycle. The PIP is often the first written step in a progressive discipline process, although it may be preceded by coaching and other verbal performance discussions and/or written communications. An acronym that captures the elements of effective goals: Specific, Measurable, Achievable (or Attainable), Relevant (or Realistic, Reasonable) and Time-Bound. In the United States, an employee labor organization formed to bargain with management through a collective bargaining agreement (CBA) regarding wages, hours and work conditions. Intended to refer to any kind of employee bargaining structure, including European Works Councils. Refers to all workers over which management has performance oversight. This will always include paid employees but may also include volunteers, contingent workers, temporaries and/or contractors. ANSI/SHRM

15 4.2 Acronyms and Abbreviations CBA IDP PIP SHRM Collective Bargaining Agreement Individual Development Plan Performance Improvement Plan Society for Human Resource Management 10 AMERICAN NATIONAL STANDARD

16 5.0 Overview of Performance Management Performance management is the system of maintaining or improving the job performance of employees through the use of performance planning processes, along with coaching, mentoring and providing continuous feedback. Over the years, many organizations have implemented performance planning processes. These processes are designed to focus on reviewing the employee s performance by his or her coach, more commonly known as the manager or supervisor. The traditional intent of a performance review is for an employee and manager to examine, at least annually, the employee s duties, competencies and accomplishments. In addition, the performance review provides an opportunity to develop goals for the coming year and to discuss career advancement issues to ensure the employee s development and growth. Not all organizations use a formal performance review process and, in some cases, are bound by collective bargaining agreements (CBAs). However, if practiced fairly with a balanced approach, a performance review process can help engage all employees and create a sense of personal responsibility, including in a union environment. These outcomes, in turn, can lead to a healthy work environment that instills pride in its workers and leads to the accomplishment of organization goals. As generations change, the needs and values included in a performance review process may also change. Therefore, leaders must amend their concept of performance reviews to ensure they capture what is valued by the new generations of workers and specifically a focus on: Motivation and learning. Coaching and mentoring. Effective methods of recognition. Effective methods of communication. Even though these areas have been embedded within the traditional style of performance reviews, a focus on these four components for the next generation s workforce ensures that the human resource function stays relevant and continues to be an innovative, successful leader in employee empowerment. ANSI/SHRM

17 5.1 Performance Management as a System One of the key advancements that differentiate human resources from its more administratively focused predecessor, personnel management, is the emphasis human resources places on performance management. More specifically, the routine of examining employee or team performance becomes a process when behaviors and outcomes are subsequently re-measured against goals and past results are compared against most recent results. However, the process evolves to become a system when the measured outcomes of one cycle become the primary input of the next cycle. The importance given to feedback and the formal creation of a feedback loop connects performance management to systems theory. The most comprehensive application of a dynamic performance management system occurs when the cause and effect connections of current performance are used to define and align future performance. In the field of human resources, the latter connection can be achieved by incorporating the concepts of goal setting and performance improvement plans into the feedback processes of a performance management system. 5.2 Flexibility of Performance Management Processes This Standard is not designed to promote any particular type of performance management process. A multitude of options may be used. However, the elements of this Standard should be included in any performance management processes the organization selects to meet its needs. Although this Standard addresses documents and plans, the process an organization selects does not need to contain these exact items as traditionally viewed. If an organization chooses to use a more innovative approach, the elements of this Standard should still be contained in the process, such as goal setting, performance improvement, and opportunities for the employee to provide and document alternative solutions. Somewhere in the process, the organization will assess how the employee or team is achieving the organization s criteria/measure/value. It is during this assessment that these standards should be included. 5.3 Applicability of the Standard to Union or Work Council Environments In general, the performance standards outlined in this document are recommended for use in any work setting, including union or work council environments. However, different jurisdictions and different collective agreements and related legal rights and obligations may, at times, make the application of these standards difficult or impossible. The specific legal parameters of employment will necessarily supersede industry or professional workplace standards and practices. Nevertheless, the underlying elements and processes outlined herein are of constructive value to any and all work environments. Accordingly, where not yet applied, it is recommended that this Standard be strongly considered, if not incorporated, in future collective bargaining contract negotiations or policy and procedure development. 12 AMERICAN NATIONAL STANDARD

18 5.4 Fairness and Equity At a minimum, performance management processes must be fairly and consistently administered without regard to non-work-related issues. To identify unintended or systemic bias, an analysis of the full process and the actual performance ratings by a demographic group should be conducted at least annually. 5.5 Roles of Manager and Employee Regular, formal and constructive communication is the central mission of the performance review process. To facilitate this objective, both the employee and his or her manager conducting the performance review should be equally informed and aware in advance of the steps in the process, how it works, why employee performance is evaluated and what the expectations are after the review is completed Manager Role For goal setting, the manager communicates management s expectations and goals to the employee and works collaboratively to develop individual goals in alignment with organization goals. For the review itself, the role of the manager is to ensure that the employee s performance review is conducted fairly, objectively and in accordance with the organization s policies and procedures. As a matter of best practice, the manager conducting the review should always be aware of and manage the amount of time each participant is actively communicating during the review. In general, the most effective communication occurs when both the manager and the employee use similar amounts of time speaking or listening. The manager is responsible for observing and documenting both successful and unsuccessful performance behaviors of the employee or team over the period of the review cycle for later review by the manager. The manager is accountable for providing continuous feedback to the employee about his or her performance. To be maximally effective, performance management is not a once-a-year activity it is a continuous dialogue between a manager and an employee. The manager is responsible for translating performance observations into a documented format that is accessible to the employee and for incorporating these observations into the organization s selected performance management process. The manager is expected to communicate clear examples of successful or unsuccessful behavior by the employee. It is the manager s duty to deliver the performance message to the employee in a manner that informs, teaches, directs and/or coaches ANSI/SHRM

19 the employee. At the conclusion of an effective performance review, the employee will know what will be expected of him or her going forward. The manager is expected to document any disagreements with the employee regarding the review. The manager must sign and date all reviews. For PIPs, the manager s role is to outline expectations clearly and to monitor progress and administer consequences fairly Employee Role For goal setting, it is the employee s role to participate in developing SMART goals aligned with the organization s goals and to commit to them in good faith. For the performance review, the role of the employee is to participate in the performance review process in a constructive manner. The goals of the review are greatly enhanced when the employee contributes in an active rather than passive manner. The employee should be aware and respectful of his or her manager s authority and responsibility to conduct the performance review. Depending on the process developed in a particular organization, the employee may or may not be responsible for completing a self-evaluation. The employee is responsible for listening to the review of the manager. The employee is expected to take the observations, feedback and goals outlined and incorporate them into his or her future work performance. It is the duty of the employee to ask questions and/or raise issues with the manager when the employee feels his or her performance has not been measured or documented fairly and accurately. If these questions or issues cannot be resolved in discussion, the employee is responsible for documenting these in a proper format in the performance management process. The employee is expected to sign and date his or her review, acknowledging that he or she has received the review, not that he or she necessarily agrees with it. For a PIP, the employee is accountable for committing to the plan steps and for dealing honestly with management. 14 AMERICAN NATIONAL STANDARD

20 6.0 Goal Setting Standard 6.1 Scope This Standard describes the minimum effective standard for performance goal setting based on job duties, work projects and desired behaviors. It does not address competencies. The Standard is intended to apply to individual and team performance in large and small organizations within union or non-union environments. The Standard also includes a timeline for goal setting and the goal-setting process, as well as for documentation and review and adjustment of previously set goals. 6.2 Types of Goals Job Description Goals Goals may be based on achievement of a pre-established set of job duties. These goals are expected to be accomplished continuously until the job description changes. Examples might be financial, customeroriented, or process- or system-oriented goals Project Goals Goals may be based on achievement of a project objective. These goals may be set for a single year and changed as projects are completed. Job description and project goals are what needs to be accomplished Behavioral Goals Goals may be based on certain behaviors. These goals are expected to be accomplished continuously. Behavioral goals are how things need to be accomplished Stretch Goals Goals that are especially challenging to reach are sometimes referred to as stretch goals. Stretch goals are usually used to expand the knowledge, skills and abilities of high-potential employees; however, some organizations require at least one stretch goal for every employee Rating Scale Most performance management processes use a rating scale to indicate performance levels. Examples are Likert scales or descriptions of successive performance levels. The type of scale should be tailored to the organization; however, all effective performance management processes should incorporate some kind of measurement. ANSI/SHRM

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